Business

Shark Tank funds fewer women than men, with less money

When Ann Crady Weiss pitched her first start up — a social network known as Maya's Mom that would allow mothers to seek advice and share their experiences — male investors weren't exactly enamored with the idea.

But Weiss' story isn't exactly shocking or unique: it's well-known that women in tech aren't embraced by the primarily male venture capitalist community. Only about 5% of venture capital for new startups goes to companies headed by women.

Now Weiss is the co-founder and CEO of her second startup: Hatch Baby, which produces products to help new parents, like a changing pad that tracks a baby's weight, growth, and feeding patterns. While Hatch Baby has already brought in $7 million in Series A funding, Weiss turned to an unusual source of funding for a proven Silicon Valley CEO: ABC's "Shark Tank."

The competition show, in which entrepreneurs pitch celebrity investors like Mark Cuban, Robert Herjavec, Chris Sacca, and Ashton Kutcher to fund their companies, is far from a realistic portrait of a typical VC meeting.

The show is highly produced, flashy, and set to a score of dramatic music.

But the show does realistically depict the funding challenges women in Silicon Valley face in trying to get a room of male investors onboard with their product.

An implicit bias

Like in the real Silicon Valley, the odds are stacked against women who appear on "Shark Tank."

Companies founded by men received an average valuation of nearly $1.7 million, while companies founded by women received an average valuation of just over $781,000, according to data compiled by "Shark Tank" superfan and Rock Health founder and CEO Halle Tecco.

The women who appear on the show do tend to ask for less than their male counterparts.

But that's not the reason behind the lower valuations, Tecco tells Mashable.

"When they come on the show, women do tend to ask for less money at a lower valuation…but the gap between what they are asking for and receiving from the Sharks is much higher than expected," Tecco says. "Something is happening during the negotiation where the sharks are driving the valuation down and women are willing to give up more of their company to close a deal."

Women who have refused to compromise their valuation haven't fared well in the shark tank: take entrepreneur Jesse Genet, who valued her company Lumi — a startup that offers custom branded office supplies — at $5 million during her appearance. It was a figure investor Kevin O'Leary called "ridiculous."

She was offered substantially lower deals, which she all refused, ultimately walking away from the show without a penny. Off the show, she's found success, bringing in $2.5 million in profits and gaining acceptance into the prestigious start-up incubator Y-Combinator.

Pitching to your crowd

When women do receive cash on the show, it's primarily coming from the two female investors: Barbara Corcoran invests in female-fronted companies 48% of the time, while Lori Grenier invested 29% of the time — more than all of their male counterparts. (If you were curious, Herjavec was the least likely out of all of the sharks to invest in companies founded by women, only funding their companies 15% of the time.)

"It perfectly reflects what we see in Silicon Valley," Tecco says. Studies show venture capital firms with senior women are more likely to invest in companies founded by women.

"There is so much presumption that goes into an investment decision. It’s a bet on a founder’s ability to execute a vision, so implicit bias often creeps into an investor’s decision-making. Studies show that men are judged on their potential, whereas women are judged on what they already have accomplished," Tecco says. "This means more bets are being placed on unproven men than unproven women founders."

It's a fact that Tecco knows too well. When she tried to raise funding for Rock Tank — a startup accelerator geared at companies focused on combining health care and technology — she had quite a few challenges getting investors on board.

"I heard a lot of no’s, including one Boston-based VC who asked “who are you to do this?" Tecco says.

By now, Weiss has perfected the VC pitch meeting. She's learned from the mistakes she made when attempting to court investors for Maya's Mom, including that she didn't ask for enough money from the get go.

"When I pitched my first company," Weiss says, "it was definitely on my mind that I didn’t look like who I was pitching to."

When she appeared on "Shark Tank" with her husband and co-founder David Weiss, she remembered the male venture capitalists who didn't invest in Maya's Mom because they didn't understand that new moms needed a social network. While she only had one woman — Grenier — on her panel of sharks, she did have the benefit of having a male investor who likely would appreciate a company geared at helping new parents: proud dad Chris Sacca, who's invested in Twitter and Uber. Sacca has also been outspoken about how Silicon Valley needs to show more support for women.

"You have to be a new millennial parent to understand our company," Weiss says. "We knew that he had two little ones and another one on the way. The rest of them don’t have kids."

How to fix the problem

But for most female investors, real life VC firms still will be less likely to bite at their startups. And that needs to change, Weiss says.

"I believe that venture capital really does want to make a change," Weiss says. "The industry is interested in bringing underrepresented people to the table. Diversity does create more success. They’re going to do it because it leads to better outcomes."

But Tecco says that there's a long way to go — and that the prospects for women entrepreneurs will only get better when VCs undergo sensitivity and diversity training, and change their attitudes about who makes a good investment or investor.

"Even after all of the conversation, coverage, and controversy on the gender topic over the past few years, even the best VCs are still saying offensive shit," Tecco says, pointing to VC Michael Moritz's recent comments that his firm couldn't find women to meet their standards. "If VC firms only recruit former tech founders, then a lot of women will be overlooked for the job. VCs need to realize the value that diversity — background, experience, and talent — could bring to their firms."

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